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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘B’ MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 31/12/2015 of the Ld. First Appellate Authority, Mumbai, deleting the addition of Rs.1,91,95,068/- made by the Assessing Officer estimating the gross profit at 14.8% as against 6.93% ignoring the factual matrix, admitting additional evidence in violation of Rule-46A of the Income Tax Rules, 1962 (hereinafter the rule)
During hearing, Shri Suman Kumar, Ld. DR, strongly defended the assessment order by contending that the necessary details were not filed by the assessee for which our attention was invited to para-5.1 of the assessment order. It was also pointed out that the Ld. Commissioner of Income Tax (Appeal) grossly erred in reducing the gross profit by granting relief to the assessee and did not controvert the factual finding recorded in the impugned order. It was also pleaded that neither any examination of facts was done by the First Appellate Authority nor any remand report was sought from the Ld. Assessing Officer, therefore, it is grave violation of rule 46A of the I.T. Rules. The Ld. DR,
M/s. Jayachandra Agro Industries Pvt. Ltd. empathetically contended that the reason of fall in the gross profit was not explained by the assessee and there is 35% jump in the sale for which our attention was invited to page- 15 of the paper book. The crux of the argument is that the assessee did not explain the factual matrix properly. It was pointed out that still if there is any grievance to the assessee, the matter may be set-aside to the file of the Ld. Assessing Officer so that the necessary evidence, if any, may be again examined. Our attention was invited to section 250(4) of the Act.
2.1. On the other hand, Shri Mohan Agarwal, Ld. counsel for the assessee, defended the impugned order by contending that the necessary details were filed by the assessee and the books of accounts of the assessee were wrongly rejected by the Assessing Officer as no discrepancy was pointed in such books. It was also pleaded that due to increase in the prices of raw material, there was a fall in the gross profit. It was contended that unit closed in 2016 and the products of the assessee are excisable. Our attention was invited to various pages of the paper book.
M/s. Jayachandra Agro Industries Pvt. Ltd.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee was engaged in the business of Maize Raw Oil, manufacturing in maize refined oil, trading and generation of electricity through windmill, declared total income of Rs.74,05,085/- in its return filed on 28/09/2012, which was processed u/s 143(1) of the Act. The case of the assessee was selected under CASS, accordingly, notice u/s 143(2) and 142(1) along with questionnaire were served upon the assessee. The assessee attended the proceedings and the details were verified. During scrutiny assessment, it was observed by the Ld. Assessing Officer that there is huge dawn fall in gross profit from 18.84% to 6.93%, therefore, the assessee was asked to justify the huge down fall in gross profit ratio and was further asked to produce the stock register and purchase bills for verification. The assessee submitted its reply vide letter dated 09/02/2015. The observation made by the Ld. Assessing Officer is reproduced hereunder for analysis:-
“In response to the said query, the assessee has submitted its reply vide letter dated 19.02.2015, which is placed on record. Assessee has submitted the descriptive stock details like
M/s. Jayachandra Agro Industries Pvt. Ltd. opening quantity, purchase, consumption and so on. Which is nothing but just a piece of paper from which no inference of downfall in G.P. ratio can be drawn. Also, the assessee did not submit anything regarding stock valuation details, direct cost component included in the stock. This piecemeal paper does not serve the purpose of stock register, this is nothing but just to mislead the revenue by providing confusing details rather than subjective submission. Also, the assessee has failed to produce the purchase bills to verify the stock quantity which has been specifically asked. Assessee has showed his inability to produce the same. Hence, it is not possible to draw the correct G.P. of the assessee business in absence of basic component of books of accounts on which the G.P. of the business depends. In such circumstances, it is believed that the assessee has not maintained proper books of account in accordance with the provisions of section 44AA of the I.T. Act, 1961. Hence, it is not possible to accept the financial results declared by the assessee. The problem as narrated by the assessee are not directly attributable to any fall in G.P. No evidences have been let into substantiate the reasons. There is no proper record of the stock which is vital to determine correctness of the assessee’s business result.” In the light of the aforesaid conclusion the Ld. Assessing Officer relied upon various judicial pronouncements and took the average of gross profit ratio of previous two years which came to 14.85% and make the addition. On appeal before the Ld. Commissioner of Income Tax (Appeal), the claim of the assessee was accepted and the addition so made was deleted. The Revenue is in appeal before this Tribunal.
2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion
M/s. Jayachandra Agro Industries Pvt. Ltd. drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that the First Appellate Authority neither sought a remand report from the Ld. Assessing Officer nor herself examined the factual matrix, therefore, it is a violation of Rule 46A of the I.T. rules. The observation made in the assessment order was not controverted by the First Appellate Authority. In para 5.1 of the assessment order, it has been specifically mentioned that the assessee showed his inability to produce the details and necessary bills to verify the stock quantity, which was specifically asked. The books of accounts were held to be not properly maintained in accordance with the provisions of section 44AA of the Act and the financial results declared by the assessee were not accepted. Even as per section 250(4)
, before disposing of any appeal, the First Appellate Authority is empowered to make further enquiry as he thinks fit or to direct the Ld. Assessing Officer to make the same. In the present appeal, the Ld. Commissioner of Income Tax (Appeal) did not ask for remand report from the Ld. Assessing Officer. During hearing, the ld. counsel for the assessee
M/s. Jayachandra Agro Industries Pvt. Ltd. invited our attention to the finding mentioned in para 5.2 of the impugned order by contending that the necessary details were requisitioned from time to time and the same were verified by the Assessing Officer. The Ld. DR explained that the Ld. Assessing Officer verified the details, which were filed by the assessee but the complete details were not filed as mentioned in para 5.1 of the assessment order. Admittedly, notices u/s 143(2) and 142(1) along with detailed questionnaire were served upon the assessee. The assessee filed certain details but not to the satisfaction to the Assessing Officer and the assessee showed its inability to produce the same as mentioned in para 5.1 of the assessment order. Considering the totality of facts, we are of the view that even as per mandate of Article-265 of Constitution of India, only due taxes has to be levied/collected, therefore, we deem it appropriate to send this file to the file of the Ld. Assessing Officer to examine the factual matrix afresh in accordance with law. The assessee is directed to furnish necessary evidence, if any, including the reasons of huge fall in gross profit in comparison to earlier assessment years. Due opportunity of being heard be M/s. Jayachandra Agro Industries Pvt. Ltd. provided to the assessee. The Ld. Assessing Officer may also examine the profit ratio of other assessees dealing in identical business in the nearby area. Thus, the appeal of the Revenue is allowed for statistical purposes.
Finally, the appeal of the Revenue is allowed for statistical purposes.
This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 24/01/2018.
Sd/- Sd/- (Rajesh Kumar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 24/01/2018 f{x~{tÜ? P.S //.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,